Top five risks facing directors and officers

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Top five risks facing directors and officers

For example, it would be possible to take a director’s overseas misconduct into account in disqualification proceedings in the U.K., meaning that risks facing directors overseas are transported back into the U.K.

How corporate leaders rank their business risks
More than twice as many executive directors as non-executive directors (NEDs) rate anti-corruption legislation, including the Bribery Act, as of concern.

“This may be due to NEDs assuming (perhaps dangerously) that they are less likely to be called to account than management for the company’s systems and controls to prevent bribery in the event of a corruption investigation or proceeding,” says Andrew Barton, counsel at Allen & Overy.

- 47% worry about the risk of being sued abroad;
- 26% worry about the risks associated with foreign directorships; and
- 19% worry about the risk of extradition of company directors, mirroring the extraterritorial threat.

“Ten years ago extraterritorial claims were brought against the directors of Parmalat, but, with today’s more sophisticated global litigation techniques, both regulators and claimants are more alive to the potential. Antitrust regulators, for example, are considerably more joined up in their approach to wrongdoing across borders,” says Barton.

Thirteen-and-a-half per cent (13.5 per cent) worry about the threat of environmental claims – an issue that should perhaps be moving up the agenda. Greenpeace claims the risk of climate-related lawsuits is rising, and has launched a campaign that takes the form of ‘Dear CEO’ letters, which invite answers from business leaders to specific questions relating to their exposure and coverage for these types of claims.

The premise appears to be that, as the threat of litigation increases, so too does the threat that company executives will be made personally liable and that their insurers will be vulnerable to large pay-outs.

Some directors and officers (D&O) policies exclude cover for clean-up and pollution costs, and those exclusions can also extend to the provision of defence costs in relation to allegations of pollution – suggesting that Greenpeace has highlighted a risk more directors and risk managers should be alive to. (continued.)